While the French firm owns 49% stake in the Nagpur-based joint-venture, Dassault Reliance Aerospace Limited, 51% is held by Reliance Defence

New Delhi: French aviation major Dassault Aviation is looking at buying out the stake of Anil Ambani’s Reliance Defence in their joint venture Dassault Reliance Aerospace Limited (DRAL), which operates a plant in Nagpur.

According to industry sources aware of the matter, the French firm has already initiated talks with Reliance Defence over buying the stake, since further expansion of the plant is on hold owing to the inability to infuse more money into the project.

While the French firm owns a 49 percent stake in the joint venture, 51 percent is held by Reliance Defence.

Dassault and Reliance announced their joint venture and the creation of DRAL on 3 October 2016, barely two weeks after India signed a 7.878 billion-euro deal for 36 Rafale jets in a flyaway condition.

The joint venture had initially planned to recruit and train 650 employees by 2022, with the eventual aim being the rollout of a complete Falcon business jet from Nagpur. However, the plans are in disarray because of reported financial trouble Anil Ambani is facing.

Sources said, since India allows 100 percent foreign direct investment (FDI) on a case-to-case basis, Dassault Aviation is hoping that clearances would come in. It is learnt that, while Dassault Aviation was initially scouting for another possible Indian partner, it has decided to go alone.

The Nagpur Plant

The DRAL facility in the MIHAN Special Economic Zone in Nagpur was building components for the Rafale fighters, like engine doors, canopy, etc., but the activity has slowed down, according to sources.

The facility was originally meant for making components for Falcon jets and not for the Rafale jets. But in June 2019, Dassault Aviation is likely to start manufacturing components of the Rafale fighter jets at its India facility, with the wares destined for global customers.

The facility came up as part of the offset obligations in the 2016 Rafale deal under which 50 percent of the value of the contract had to be ploughed back into India.

According to sources, Dassault Aviation will also like to set up a manufacturing facility for Rafale in India if it bags the contract to build 114 fighters for the Indian Air Force.

While IAF operates 36 Rafale, it is also looking at issuing a tender for 114 new fighters due to depleting strength.

The 36 were bought for an emergency, to arrest the steep decline in numbers for the Indian Air Force (IAF), which has a sanctioned strength of 42 Squadrons but currently has only 31, including those of the ageing MiG 21s and Jaguar besides the MiG-29 — all of which will be decommissioned by 2029-30.

The government has decided to go in for the purchase of 26 naval versions called the Rafale M. While it has larger ‘Make in India’ components than the IAF one — all of which will be manufactured at the Nagpur facility — the numbers are too small for any larger indigenous development program.